DoJ to investigate cable company stranglehold of Netflix, Hulu: report

The U.S. Justice Department will investigate whether cable television providers have violated antitrust laws by blocking competition from streaming services like Netflix and Hulu, according to recent reports from Bloomberg and the Wall Street Journal. The companies coming under DoJ scrutiny include Comcast and Time Warner Cable.

The issue at hand is purportedly whether these cable giants use their status as major service providers of both television and Internet to unfairly make deals with content providers in Hollywood. Further, the investigation will look at how tiered broadband plans (and the data caps that come with them) affect services like Netflix, which rely upon a high-speed Internet connection to deliver its services to subscribers. If the companies are found to have used their position as gatekeepers for television content, or purposefully instituted certain Internet access plans to hamper video streaming services, then they would be in violation of the law.

So far, neither Comcast, Time Warner Cable, Neflix, nor Hulu (which is partly owned by Comcast/NBCUniversal) have commented on the DoJ’s alleged investigation. The Justice Department has not yet commented either.

The as-yet unconfirmed DoJ probe follows Sen. Al Franken’s (D-MN) assertions to the Federal Communications Commission that Comcast’s Xfinity video streaming service, which allows its customers to stream on-demand video to the Xbox 360, violates Net neutrality rules by disregarding its own data caps for videos streamed through Xfinity, while still applying broadband used for Netflix to those caps. Netflix CEO Reed Hastings has made the same allegations.

“Comcast [is] no longer following net neutrality principles,” Hastings wrote on his Facebook page in April. “Comcast should apply caps equally, or not at all. I spent the weekend enjoying four good Internet video apps on my Xbox: Netflix, HBO GO, Xfinity, and Hulu. When I watch video on my Xbox from three of these four apps, it counts against my Comcast Internet cap. When I watch through Comcast’s Xfinity app, however, it does not count against my Comcast Internet cap. For example, if I watch last night’s SNL episode on my Xbox through the Hulu app, it eats up about one gigabyte of my cap, but if I watch that same episode through the Xfinity Xbox app, it doesn’t use up my cap at all. The same device, the same IP address, the same Wi-Fi, the same Internet connection, but totally different cap treatment. In what way is this neutral?

The DoJ’s alleged investigation will include a focus on this issue.

The investigation will also reported look at whether content providers’ practice of offering cable companies far lower prices in distribution deals is a good business practice, or whether it is specifically designed to stifle competition with streaming services like Netflix.

It will be extremely interesting to watch how this investigation plays out — if it’s happening at all, though that seems highly likely to us. If the Justice Department rules against the cable companies, it may have profound repercussions for the cable industry, which has so far moved into the streaming age kicking and screaming. For those of us who wish to “cut the cord” as soon as possible, without having to sacrifice access to content, we’ll have our fingers firmly crossed while this process plays out.